Michael Reddell: Tariff madness and monetary policy

We’ve seen this morning the latest step up in the Trump-initiated trade war, with the additional 50 per cent tariffs imposed on imports from China. If the tariff madness persists – but in fact even if were wound back in some places (eg some of the particularly absurd tariffs on supposed US allies in east Asia, or 48 per cent tariffs on Madagascar’s vanilla) – it is going to be extremely damaging to global economic activity in the (probably protracted) transition.

Michael Reddell: Forty years of floating

Last year there was an interesting new book out, made up of 29 collected short papers by (more or less) prominent economists given at a 2023 conference to mark Floating Exchange Rates at Fifty. The fifty years related to the transition back to generalised floating of the major developed world currencies in 1973 (think USD, JPY, GBP, and the West German deutschemark, plus the Canadian and Swiss currencies). It was quite an interesting collection and even has some discussion of emerging markets. What was striking, reading it at this end of the world, was the almost complete absence of any discussion of the experience of smaller advanced countries – this isn’t just a matter of places like New Zealand or Norway or Israel or Iceland, but not even Australia gets a mention in the index.

Michael Reddell: Orr at it again

I decided not to bother listening to the Reserve Bank’s appearance at FEC yesterday morning. After all, the OCR decision had been much as expected and foreshadowed, the forecast tracks etc hadn’t changed much, and – with all due respect to some new FEC members – how searching was any questioning really likely to be?

But an old colleague listened in, and was rather concerned to hear Orr’s deputy chief executive for macroeconomics and monetary (the one with no qualifications or background in either subject) Karen Silk making what appeared to be the claim that the Bank and MPC had got the trends in inflation about right.

Michael Reddell: The MPC returns from its summer holiday

It is almost never an (unconditionally) good thing if an official policy interest rate (in our case the OCR) is being adjusted in large bites, whether that is (for example) 175 basis points of cuts in the last six months or 375 basis points of increases in just twelve months a couple of years back.

Michael Reddell: Orr on Q&A – Part II

My post this morning [ https://breakingviewsnz.blogspot.com/2024/12/michael-reddell-more-outright.html ] was based on Adrian Orr’s Q&A interview as found on TVNZ+. However, it turns out that that wasn’t the full interview which (thanks to the kind people at Q&A for pointing me to it) is now available on Q&A’s Youtube account here. The full interview is almost half an hour, and is probably worth watching if you haven’t already watched the selections on TVNZ+ – it is a more rounded presentation and chance for Orr to tell his story.

Michael Reddell: More outright dishonesty from Orr

The Reserve Bank Governor has given an interview to TVNZ’s Katie Bradford, apparently done under the aegis of the Q&A show but too late in the year to actually be broadcast on Q&A itself or to be done by Jack Tame, Q&A’s regular and most demanding interviewer.

J. R. MacLeod: Understanding the Basics of Modern Banking

The monetary and banking system plays an incredibly important role in contemporary economies. Knowledge of how this system functions should therefore be spread as widely as possible, yet the education system barely instructs its students about this subject, if indeed it instructs them about it at all. This article aims to contribute to bridging this gap by giving a basic overview of how the system of money creation and banking works today. The reader may also be interested in studying the discussion of alternative systems, however, this article will focus only on describing the dominant system of the present.

Michael Reddell: Fiscal and monetary policy

Over the last few years, The Treasury seems to have been toying with bidding for a more significant role for fiscal policy as a countercyclical stabilisation tool It seemed to start when Covid hubris still held sway – didn’t we do well? – and the first we saw of it in public was at a Treasury/Reserve Bank conference in mid 2021, at which both the Secretary and some of her staff were advancing thoughts of that sort (I wrote about it here). More recently, this mentality has shown up in the commissioned report from US economist Claudia Sahm (post here) and in the consultation for The Treasury’s forthcoming long-term insights briefing (post here).

Michael Reddell: Heading for 2.5% (or less) by this time next year?

There is a lot one could write about the Reserve Bank’s Monetary Policy Statement and the Governor’s (sadly all-too-typical) thin-skinned and defensive responses to questions since, whether from journalists or a lone MP at the Finance and Expenditure Committee this morning. He never ever acknowledges a mistake and seems utterly unable to cope with criticism or disagreement whether (as reports suggests) inside the Bank or (as we can all see) outside it. In a field where there is inevitably huge uncertainty, it renders him simply unfit for office.

Professor Robert MacCulloch: The Chancellor of AUT and monetary policy

I can't understand the Chancellor of AUT (and former Chair of Health NZ) Rob Campbell's explanations as to how monetary policy works

The Chancellor of the Auckland University of Technology (and former Chair of Health NZ) is becoming a prolific writer, explaining to all and sundry on platforms like Newsroom how economics works. The thing is, I can't understand many of these explanations. Take his latest comments which question the way monetary policy is being conducted in NZ.

Michael Reddell: Astonishing indifference to a failed instution

Since taking office, the new government has replaced quite a number of chairs of government entities. I’m sure there are many others but NZTA, Health NZ, Pharmac, and the FMA are just the examples that spring to mind. It isn’t uncommon for such changes to be made, and in many government entities board members can be replaced at will by the government of the day.

Michael Reddell: A puzzle

The Reserve Bank’s Monetary Policy Statement yesterday seems to have caught the market on the hop. Such things would be less likely if (a) we had a better MPC, and (b) they actually communicated (speeches and the like). A steady flow of supporting empirical research might help as well. But immediate market surprises aren’t really my prime focus or interest.

Michael Ryan: Does fighting inflation always lead to recession?

Does fighting inflation always lead to recession? What 60 years of NZ data can tell us

There is an ongoing global debate over whether the high inflation seen in the aftermath of the COVID-19 pandemic can be lowered without a recession.

Robert MacCulloch: Does our New Government want to take us back to 1989?

This blog disagrees with ACT leader's David Seymour's views on the Reserve Bank. Has he just come in fresh from a talk with Don Brash? And together concluded that the whole show should be returned to what was in place when the Reserve Bank of NZ Act was passed in 1989? Maybe Don Brash could apply to be the new governor to implement Seymour's new legislation when Adrian Orr's tenure comes to an end? Give us a break.

Point of Order: Plenty to ponder on economy......

.....while OCR stance softens, a widening current account deficit threatens NZ’s credit rating

It’s been an eventful week for the New Zealand economy. On one side, the Reserve Bank was seen as putting the brakes on the Official Cash Rate, with a 25 basis points increase heralded as good news for mortgage-holders. On another, NZ’s record current account deficit is seen as posing a real threat to NZ’s sovereign credit rating.

The current account deficit, reflecting we’re spending more than we’re earning overseas, rose to its highest level ever of $33.8bn last year. As a percentage of GDP, a measure of its significance in the context of NZ’s overall economy, it weighed in at 8.9%, the highest it has been since the 1970s.

Could it get worse before it gets better?

Bryce Wilkinson: The mess the government has made of the monetary policy, and the task ahead

Inflation is a problem for the first time in 30 years. Property prices have whiplashed. The Reserve Bank of New Zealand (RBNZ) has cost taxpayers $9 billion, for no clear net benefit.

What underlies this mess? This week the New Zealand Initiative published my report addressing that question.